Trans-Tasman super transfer close

Some $20 billion was locked up in Australian superannuation savings that was unclaimed, most thought to belong to New Zealanders.
Some $20 billion was locked up in Australian superannuation savings that was unclaimed, most thought to belong to New Zealanders.

In a refreshing change from discussing proposals to patch some perceived loophole or other in our tax system, it is good to be able to discuss the recent announcement that confirmed Australia has finally introduced a bill to give effect to the superannuation arrangement of July 16, 2009, between New Zealand and Australia, to put legislative provisions in place to allow superannuation savings in KiwiSaver and the Australian equivalent schemes to be transported across the Tasman, writes Craig Macalister in Taxing Times.

At the time of the announcements in 2009, the Government estimated that some $20 billion was locked up in Australian superannuation savings that was unclaimed. Much of this was thought to relate to compulsory Australian superannuation contributions of New Zealanders who, having worked in Australia, had now returned to New Zealand.

New Zealand passed the necessary legislative changes in 2010. At the time the Government stated that it hoped the arrangements would be functioning in the second half of 2010. However, it seems that Australia has dragged its heels a little in putting their part of the arrangements in place, having only just introduced its legislation to give effect to the bargain. It is now hoped that the trans-Tasman portability arrangements will be in place from July 2013.

No doubt there will be much media coverage of the portability arrangements when they are finally in place.

The government, and no doubt the New Zealand funds management industry, will be eagerly awaiting an influx of accumulated superannuation savings from Australian schemes. But, before you rush off and transfer your Australian nest egg across the ditch, you may want to reflect on the advantages and disadvantages.

The advantages are that the Australian dollar is relatively high against the Kiwi and consolidation of superannuation savings into a single fund will save on funds manager costs - especially if you have more than one Australian superannuation investment which is quite possible if you changed jobs.

The disadvantages arise when you compare the 15 per cent flat tax rate that applies to Australian superannuation versus the New Zealand rates. The New Zealand tax rates vary depending on income, but, as a general guide, the rate is 10.5 per cent for people with income less than $14,000, 17 per cent for people with income less than $48,000 and 28 per cent when income exceeds $48,000. While Australia has a capital gains tax, New Zealand schemes generally pay tax on all equities and equity gains, other than New Zealand and Australian equities.

Another factor is the size and depth of the Australian capital market compared with New Zealand, and further, having funds with an Australian-based funds manager spreads risk.

So what to do? To prepare for the upcoming change you can search for your superannuation savings accounts through the Australian Tax Office website and under the "Individuals" tab scroll down to "Check your superannuation". There is also a useful Q and A sheet on Inland Revenue's tax policy website.

The Government has cleared the way to allow transfers from complying Australian schemes transferred to New Zealand to be tax free; that is no exit taxes in Australia or tax in New Zealand (as can be the case), so the transfer of the funds will be a relatively painless exercise. However, as above take some time to inform yourself about the pros and cons before making your decision.

On the topic of Australian investments, I have noted an increase in the offerings of Australian investments lately, and property syndicates in particular. The tax issues of these should be understood, and I will cover this in my next article.

» Craig Macalister is tax principal at accounting firm WHK. He can be contacted on 03 211 3355.

The Southland Times